Is it time to tax the Billionaires?
Record corporate profits, a record cost of living, and the rich not paying their share?
Aotearoa is a social democracy. A system where public services are paid for by a progressive tax system that sees those who earn less pay less tax, and those who earn more taxed a little more. The economy is largely left to the market, although the government regulates to limit the worst excesses of Capitalism.
As the famous phrase goes “From each according to his ability, to each according to his needs”. If you earn a bit more you can afford to contribute a bit more, although still with plenty of scope for building wealth. If your needs are greater then that’s why we have a welfare system.
It works pretty well, and seems mostly fair. Until you consider a group that have immense wealth, but because our tax system is focussed on income, and not on wealth, they largely avoid paying tax. These people have various names, the mega wealthy, the billionaire class, the 1%.
Sometimes a political party highlights the problem and suggests maybe in the interests of fairness we ought to introduce a Wealth Tax? But loud voices shout back that if we dare charge the mega wealthy, the 1%, then they’ll up and leave. They’d rather go and live some place else than contribute to the society they live in here.
Most of us don’t take such threats seriously because usually they’re coming from people like Mike Hosking and Kate Hawkesby. People who similarly threaten to move to Australia if their beloved National Party don’t win the election.
The problem being, that if you threaten to leave when event A happens, and event A has definitely happened but you haven’t gone anywhere, then it just sounds like an idle threat. Labour won, why are the Hoskbys still here? Fair suck of the sav Mike. Shouldn’t you be in a resort-style gated community on the Sunshine Coast by now? It’d be just like living among your listeners. Hmm, maybe that’s why he is still here.
Of course the supporters of Mike and Kate will say they weren’t literally going to do the thing they said they would do, it was not literally true. That’s an interesting phrase isn’t it “not literally true”, but a bit unclear. How about if we switch it around and instead say “literally not true”?
That’s better. For example the things Mike and Kate say are literally not true and their listeners literally do not care. Because they are team Blue so they agree with everything, even if you point out that things they say are “literally not true”. Or to simplify it further, “lies”.
Still it turns out some Norwegian Billionaires are voting with their feet and leaving that country over a small increase in their Wealth Tax.
Now Norway does have some pretty high progressive income taxes. Lets look at the sort of income level that depending on which party gets in to power in NZ might see a person might pay a bit more under someone like the Greens, or a lot less under someone like ACT. An income of $180,000 NZD.
In Norway you would pay 34.9% total tax and keep 65.1% net.
Whereas in NZ you would pay 29.14% total tax and keep 70.86% net.
However if you increase that income further, more like that of a low paid CEO, to $1.8m NZD then the figures move further apart. At that level:
In Norway you would pay 47.3% total tax and keep 52.7% net.
Whereas in NZ you would pay 38% total tax and keep 62% net.
So in Norway income tax is certainly a fair bit higher than here. But of course those are income taxes and Billionaires don’t really pay income tax. You’ve all seen the headlines of the wealthiest billionaire families around the world paying very low, small single figure, rates of tax. While people who work for wages pay a far higher proportion in tax. Turns out billionaires don’t pay a lot of tax at all and they’re not very keen on that situation changing.
There is a reason billionaires don’t pay income tax. They don’t earn traditional income. Can you imagine how long it would take to save a billion dollars from earnings? From wages and salary payments?
If you could save $100 per hour for every hour you worked, 40 hours per week, 52 weeks per year, all tax free, that would be $208,000 in a year. Or in other words you would have to do that week in week out for 5,000 years in order to have one billion dollars.
Even if you could save $1,000 per hour, with no tax, then it would take 500 years. In order to achieve billionaire status within a lifetime, say after 50 years of work, you would have to save $10,000 per hour for every hour you worked. You can see why Billionaires are not made from wages and salaries.
Now as well as Income Tax in Norway they have a Wealth Tax, and that has risen recently to a maximum of 1.1% As a result more than 30 super-rich Norwegians left the country in 2022. This is the point at which the Hoskbys, and their disciples, would smirk and smugly say I told you so. Proud to be defending the rights of the rich to succeed.
So just how big was this change? Well in November, the government raised the state rate to 0.4% for assets above NOK 20m for individuals, and NOK 40m couples. Taking the maximum overall Wealth Tax rate, including municipal and state taxes, to 1.1%.
It is worth noting those thresholds at which the tax increase applies. NOK 20m for an individual is a bit over $3m NZD. And of course the threshold for couples is over $6m NZD. So that is a lot of exempt wealth.
So is that what would happen if we had a Wealth Tax here? Some billionaires might leave? Seems unlikely but worth the risk. I mean if they’re not going to pay tax what use are they? Might as well let them go.
The prepared argument sits there ready to go of course - it’s an envy tax. That is the level of brain washing that has occurred. Getting a billionaire to pay a little bit of tax is derided by a smug pensioner, who has spent all morning ranting about the cost of living and the fact they can’t afford food and heating, as an envy tax. How idiotic is that?
Far from a tall-poppy situation in this country we often put those who have accumulated wealth on a pedestal. People like Hosking, or Richardson, blather on about aspiration and how if we all just worked hard like these billionaires then we’d become billionaires too. So really, you’d be shooting yourself in the foot suggesting a Wealth Tax.
Perhaps it is worth reminding ourselves why we might want a Wealth Tax. A quote from the article about Norway mentioned and linked earlier:
Erlend Grimstad, a state secretary in the ministry of finance, told the Guardian he hoped wealthy Norwegians would return “in time”.
“If you have enjoyed success and become rich in Norway, we hope you will stay and continue taking part in the Norwegian society,” he said. “We do encourage Norwegians to succeed in creating value and become rich. And we believe the Norwegian model with a strong public welfare system and high education levels are important factors in making that success possible.
“The model in Norway is that everyone should contribute relevant to ability and therefore those that have a greater ability to pay taxes, should pay a little more.”
So what do our political parties have, policy wise, for a Wealth Tax here? So that the super wealthy have the opportunity to fully take part in society with the rest of us?
Obviously neither National nor ACT have any intention whatsoever to charge their benefactors a Wealth Tax. ACT exists purely to minimise taxes on the wealthy. And it isn’t hard to deduce National’s position given this advertisement from 2020:
Jacinda Ardern was scared off a Capital Gains Tax, despite knowing it was the right thing to do. It is hard to imagine that a Labour Party in election year, desperate for votes in the centre, is going to do anything in regards a Wealth Tax.
The opposition parties will of course claim that Labour plan one. But when they say that it is not literally true. It is a lie, albeit a widely believed lie. And those are the most effective kind of lies.
Labour won’t release their tax policies until much closer to the election. They’ll seek to minimise the amount of time National can spend with focus groups working out whether to castigate or copy their policies.
At the 2020 election the Green Party wanted to introduce a Wealth Tax:
Introducing a new tax on individuals’ net wealth over $1 million. This means those who have their own wealth worth more than $1 million – not including mortgages and other debt – would be asked to pay a small annual contribution to fund stronger social support for all New Zealanders. This would only apply to the wealthiest 6% of New Zealanders.
I assume they’ll run a similar policy this year. Certainly in the last year they have called for a one-off windfall tax in response to massive record profits during the pandemic, energy crisis, and Russia’s invasion of Ukraine.
“An excess profit tax would be a simple and effective way for large corporations to pay their fair share, unlocking the resources all of us need to live with dignity, put a roof over our heads and food on the table,” Green Party finance spokeswoman Julie Anne Genter said.
A windfall tax is a high tax rate on a certain industry when it suddenly makes large profits due to something for which they were not responsible. One has been introduced for energy companies in the United Kingdom as they profit off rising oil and gas prices due to the disruption caused by Russia’s invasion of Ukraine.
There, energy companies will pay an additional 25 per cent tax for the next 12 months on their “windfall” profits, netting £5 billion or NZ$9.6b. In New Zealand, corporate profits are on track to soar 60 per cent over the past two years.
We are living in a world with ever growing inequality. Most people struggling with incomes that are not keeping pace with the spiralling cost of living. At the same time we have large corporations making record profits, and billionaires largely managing to avoid making a fair contribution.
This problem is getting worse, and the fact that discussion of policies to address it are met with threats to leave by right wing radio shock jocks and the super wealthy is a sad indictment on those people. But it’s certainly no reason not to go ahead and introduce a Wealth Tax.
certainly agree with Capital Gains Tax which would hurt my wife and I as we have inherited wealth. We have to reverse decades of reducing taxes on the wealthy. Robert Reich explains it well: https://robertreich.org/post/647312846822227968
Yes, it's time.
It often occurs to me that it must be great to be fabulously wealthy as there seem to be thousands of people, many with pulpits of various types, who will defend your right to accumulate obscene wealth to the death. Cool deal.